Introduction to Business Textbook
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Course Introduction
Introduction to Business offers a comprehensive overview of the fundamental concepts and principles that govern the business world. This course explores key topics such as the functions of management, marketing, accounting, finance, operations, and human resources. Through real-world examples and case studies, students gain insight into how businesses are formed, organized, and operated in todays dynamic global environment. The course also examines the ethical and social responsibilities of businesses and introduces students to the various challenges and opportunities faced by entrepreneurs and established companies alike. By the end of the course, students will have a solid foundation for further study in business and a greater understanding of the ways in which businesses impact the economy and society.
Recommended Textbook
OM 5 5th Edition by David Alan Collier
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Page 2
Chapter 1: Goods, Services, and Operations Management
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Q1) Customers and service providers often work together to co-produce a service.
A)True
B)False
Answer: True
Q2) Cell phones are good examples of how goods and services are bundled together for long-term profits.
A)True
B)False
Answer: True
Q3) Service encounters consist of one or more moments of truth.
A)True
B)False
Answer: True
Q4) Both goods and services can be standardized for the mass market or customized to individual needs.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Value Chains
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Q1) _____ refers to the process of acquiring and consolidating elements of a value chain to achieve more control.
A) Vertical integration
B) Horizontal integration
C) Outsourcing
D) Offshoring
Answer: A
Q2) _____ refers to acquiring capabilities in the value (supply) chain toward distributions or even customers.
A) Backward integration
B) Outsourcing
C) Offshoring
D) Forward integration
Answer: D
Q3) The focus on value has forced many traditional goods-producing companies to reduce services to their customer benefits packages.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Measuring Performance in Operations
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Sample Questions
Q1) Explain the concepts underlying the Service-Profit Chain model.
Answer: The model is based on a set of cause-and-effect linkages between internal and external performance, and in this fashion, defines the key performance measurements on which service-based firms should focus. Because much of the value created in service processes is at the service-encounter level, the Service-Profit Chain focuses on employees or service-providers. Healthy, motivated, well-trained, and loyal employees demonstrate higher levels of satisfaction that result in higher retention and productivity. This leads to higher levels of external service value to customers. External service value is created by service providers mainly at the service-encounter level. Buyers of services focus on outcomes, results, and experiences. Ultimately, good value creates higher customer satisfaction and loyalty, which in turn leads to higher revenue growth and profitability.
Q2) The primary purpose of the Malcolm Baldrige National Quality Award Program is to provide a framework for performance excellence through self-assessment to understand an organization's strengths and weaknesses, thereby setting priorities for improvement.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Operations Strategy
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Q1) Which of the following does NOT describe how customers evaluate services in a manner that differs from the way they evaluate goods?
A) Customers rely more on information from nonpersonal sources when evaluating services prior to purchase.
B) Customers perceive greater risks when buying services than when buying goods.
C) Customers can form prior expectations of expected service quality.
D) Dissatisfaction often results from a customer's inability to properly perform or co-produce his or her part of a service.
Q2) Innovation does not necessarily involve practical application or commercialization.
A)True
B)False
Q3) The _____ of a firm are the strengths that are unique to that organization.
A) strategy developments
B) strategic missions
C) vision statements
D) core competencies
Q4) To correctly identify what customers expect requires being "close to the customer." Discuss.
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Chapter 5: Technology and Operations Management
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Q1) Allied Inc. is considering the purchase of a new piece of equipment. Relevant data are shown below. \(\begin{array}{|l|rr|}
\hline \text { Annual Fixed Cost } &{\$ 700,000} \\
\hline \text { Variable Cost per Unit } & \$ & 75 \\
\hline \text { Revenue per Unit } & \$ & 200 \\
\hline \end{array}\)
a.Using this information, determine the breakeven volume.
b.If the anticipated demand for the product is 5,000 units, should Allied purchase the new equipment?
Q2) Industrial robots automate the skills that most humans can readily perform. A)True
B)False
Q3) _____ consist of two or more computer-controlled machines or robots linked by automated handling devices such as transfer machines, conveyors, and transport systems.
A) Computer-aided design/computer-aided engineering (CAD/CAE) systems
B) Computer-aided manufacturing (CAM) systems
C) Enterprise planning systems (EPSs)
D) Flexible manufacturing systems (FMSs)
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Chapter 6: Goods and Service Design
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Q1) In the context of the integrative case study of LensCrafters, which of the following statements is TRUE?
A) Each store has a visible low contact area.
B) LensCrafters' employees do not need service management skills.
C) Each store has a totally unique servicescape and layout that varies by location.
D) Low cost makes a long drive to LensCrafters worthwhile.
Q2) A ground wave radar unit developed by a defense contractor has four critical components. If any one component should fail, the radar unit would be rendered ineffective. The component reliabilities are 0.982, 0.946, 0.913, and 0.969 respectively.
Based on this data, answer the questions below.
a.What is the system reliability?
b.If the reliability of the third component is changed from 0.913 to 0.950, what does the system reliability become?
c.If the company decides to build in system redundancy for the third component, what does the third component's reliability become?
d.What is the system reliability with redundancy for the third component?
Q3) Discuss the concept of Design for Environment (DfE).
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Page 8
Chapter 7: Process Selection, Design, and Analysis
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Sample Questions
Q1) In service operations, significant volume increases can and frequently are made without changes in the service process, as would be expected in manufacturing.
A)True
B)False
Q2) A custom machine shop is able to process 25 orders per day. The average processing time is 4 days. What is the average number of orders that are in process at any time?
A) Less than 50
B) More than 50 but less than or equal to 100
C) More than 100 but less than or equal to 150
D) More than 150 but less than or equal to 200
Q3) _____ processes are organized around particular types of general-purpose equipment that are flexible and capable of customizing work for individual customers
A) System
B) Job shop
C) Flow shop
D) Continuous flow
Q4) What are some management strategies to improve process designs?
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Chapter 8: Facility and Work Designs
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Q1) Job enlargement approaches give workers more variety of work, but not necessarily more responsibility.
A)True
B)False
Q2) In a process layout technique, improvement is done on a current solution by exchanging two or three departments at a time to determine if total materials handling costs have been reduced.
A)True
B)False
Q3) What is the cycle time?
A) 6 minutes/unit
B) 7 minutes/unit
C) 8 minutes/unit
D) 9 minutes/unit
Q4) Explain the three types of teams effective for job enrichment.
Q5) The determination of specific job tasks and responsibilities is called _____.
A) job design
B) ergonomics
C) job enlargement
D) job enrichment
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Chapter 9: Supply Chain Design
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Q1) Explain the typical structure of a supply chain.
Q2) Given the retail location coordinates and the value of material movement in the following chart, find the best supply point location using the center-of-gravity method.
\(\begin{array}{lll}\text { Reta1 Outlet }&\text { Location Coordinates } \mathrm{X}, \mathrm{Y}&\text { Material Movement }\\
1 & 25,05 & 1,500 \\
2 & 17,20 & 3,000 \\
3 & 12,12 & 1,000 \\
4 & 06,09 & 2,200
\end{array}\) Which of the following is a TRUE statement about the best preliminary location (i.e., the center of gravity) for the possible store location?
A) The x-axis and the y-axis are less than 10.0.
B) The x-axis is less than 10.0, and the y-axis is more than 10.0.
C) The x-axis is more than 10.0, and the y-axis is less than 10.0.
D) The x-axis and the y-axis are more than 10.0.
Q3) A supply chain cannot be a combination of push and pull systems.
A)True
B)False
Q4) Summarize the supply chain operations reference (SCOR) model.
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Chapter 10: Capacity Management
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Q1) A firm will encounter short periods of over- and underutilization of resources with the _____ strategy.
A) capacity lag
B) capacity straddle
C) capacity lead
D) capacity reduction
Q2) The strategy of matching capacity additions with demand as closely as possible is often called a capacity straddle strategy.
A)True
B)False
Q3) _____ occur when the average unit cost of the good or service begins to increase as the capacity and/or volume of throughput increases.
A) Economies of scale
B) Diseconomies of scale
C) Costs of cushioning
D) Capacity cushions
Q4) What is safety capacity? Discuss reasons for using it.
Q5) Define the Theory of Constraints (TOC). How does TOC view throughput differently from the traditional OM perspective?
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Chapter 11: Forecasting and Demand Planning
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Q1) A nine-month simple moving average would approximately equate with what alpha ( ) factor for simple exponential smoothing?
Q2) Which of the following is NOT a valid approach to gather data for judgmental forecasting?
A) Questionnaire
B) Telephone contact
C) Personal interview
D) Company records
Q3) The sales forecast for July using the data in Table 4, forecasts sales for May as 36.25, and a simple exponential smoothing model with a smoothing constant of 0.40 is:
A) less than or equal to 35.
B) more than 35 but less than or equal to 40.
C) more than 40 but less than or equal to 50.
D) more than 50 but less than or equal to 55.
Q4) In a regression model, both the dependent and independent variables must be numerical.
A)True
B)False
Q5) Explain how forecasting is used at different levels of an organization.
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Chapter 12: Managing Inventories
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Q1) Which of the following statements is TRUE?
A) Inventory is any physical asset held for future use or sale.
B) When using ABC analysis, C items require close control by operations managers as they account for a large dollar value but a relatively small percentage of total items.
C) Dependent demand is directly related to the demand of other stock-keeping units (SKUs) and can be calculated without needing to be forecasted.
D) Stockouts occur in a fixed-quantity system (FQS) whenever the lead-time demand exceeds the replenishment level (M).
Q2) Explain the ABC inventory classification.
Q3) The Economic Order Quantity (EOQ) rounded to the next highest number is:
A) less than 25 boxes.
B) more than 25 but less than or equal to 35 boxes.
C) more than 35 but less than or equal to 45 boxes.
D) more than 55 boxes.
Q4) Inventory management does not involve supplies and replacement parts.
A)True
B)False
Q5) Illustrate the single-period inventory model with an example.
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Chapter 13: Resource Management
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Q1) Which aggregate planning strategy sets production rate equal to the demand?
A) Level production strategy
B) Chase demand strategy
C) Lot-for-lot (LFL) rule
D) Periodic-order-quantity (POQ) rule
Q2) A company currently has no items in inventory. The demand for the next four months is 200, 400, 250, and 350 units. Determine the level production rate if a level strategy is selected with the goal of ending Period 4 with 100 units in inventory.
A) 300
B) 325
C) 450
D) 350
Q3) In materials requirements planning (MRP), it is essential that all dependent demand requirements be ordered at the beginning of the planning period.
A)True
B)False
Q4) Resource management deals primarily with managing inventories in a value chain.
A)True
B)False
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Chapter 14: Operations Scheduling and Sequencing
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Q1) The chief disadvantage of the shortest processing time (SPT) rule is:
A) it maximizes the average flow time.
B) it maximizes the number of jobs in the system.
C) long-duration jobs may have excessive completion times.
D) average job lateness and average job tardiness are excessive.
Q2) Using the earliest due date (EDD) rule, the average flow time for the five jobs is
A) more than 10 but less than or equal to 20 days
B) more than 20 but less than or equal to 30 days
C) more than 30 but less than or equal to 40 days
D) more than 40 days
Q3) Using the earliest due date (EDD) rule, the average tardiness for the five jobs is
A) less than or equal to 10 days
B) more than 10 but less than or equal to 20 days
C) more than 20 but less than or equal to 30 days
D) more than 30 but less than or equal to 40 days
Q4) Compare and contrast the advantages and disadvantages of the shortest processing time (SPT) and the earliest due date (EDD) sequencing rules.
Q5) Differentiate between scheduling and sequencing.
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Chapter 15: Appendix: Quality Management
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Q1) Which of the following is NOT a practical issue when using learning curves?
A) Incentive systems and bonus plans may increase learning.
B) Complex, intellectual learning will be faster than learning simple tasks.
C) A contract phaseout may result in a lengthening of process times.
D) Keeping groups of employees together reaps a productivity benefit.
Q2) Define work measurement and what it leads to from an operations perspective.
Q3) An employee was observed over an extended period of time for a work-sampling study with the following results:
\(\begin{array}{lll}&& \text { Performance } \\
\text { Activity } & \text { Percentage of Time } & \text { Rating Factor }\\
\text { On the Phone } & 30 & 1.15 \\
\text { Filing } & 35 & 0.70 \\
\text { Face-to-Face with Customer } & 25 & 1.10 \\
\text { Idle } & 10 & \ldots . . .
\end{array}\) While doing her job in a 40-hour workweek, the employee helped 120 face-to-face, walk-in customers. Determine the standard time in minutes that it took her to help each customer.
Q4) The performance rating factor and allowances are based on human judgment. A)True
B)False
Page 17
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Chapter 15: Quality Management
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Q1) In reference to quality cost classifications, information-systems development costs would normally fall in _____category.
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
Q2) The Seven QC Tools are designed to be simple so that workers at all levels can use them.
A)True
B)False
Q3) Which of the following is NOT a part of Philip Crosby's philosophy of quality?
A) Quality means conformance to requirements, not elegance.
B) The only performance standard that matters is profits.
C) There is no such thing as a quality problem.
D) The only performance measurement is the cost of quality, which is the expense of nonconformance.
Q4) Joseph Juran preached the 14 Points for management in his quality philosophy.
A)True
B)False
Q5) Explain the four components of the cost of quality.
Page 18
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Chapter 16: Quality Control and Spc
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Q1) Using Table 1, for the R-chart, what is the value of LCL<sub>R</sub>?
A) Less than or equal to 1.0
B) Greater than 1.0 but less than or equal to 1.5
C) Greater than 1.5 but less than or equal to 2.0
D) Greater than 2.0
Q2) Historically, the average proportion of defective bars has been 0.015. Samples will be of 100 bars each. Construct a p-chart using \[z = 3\] . Suppose a sample had 0.054 defectives. What would be the best action to take in this scenario?
A) Nothing; it appears to be random variation.
B) Look for assignable causes.
C) Change z to 2 and take another sample.
D) Change z to 4 and continue sampling.
Q3) A bottling process sometimes results in overfills or underfills. Overfills are especially damaging to the equipment. Which process capability index would this company most want to monitor?
A) C<sub>p</sub>
B) C<sub>pl</sub>
C) C<sub>pu</sub>
D) C<sub>pk</sub>
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Chapter 16: Appendix: Queuing Analysis
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Q1) Which of the following is NOT a psychological strategy for dealing with a long wait time?
A) Distraction
B) Specifying the wait time
C) Displaying artwork in the waiting area
D) Technology
Q2) The manner in which new arrivals are ordered or prioritized for service is known as _____.
A) balking
B) reneging
C) queue discipline
D) queue behavior
Q3) _____ is the process of a customer evaluating the waiting line and server system and deciding not to join the queue.
A) Triage
B) Reneging
C) Balking
D) Preemption
Q4) Discuss three categories of information necessary to develop a queuing model.
Q5) What are five key assumptions for the basic, single-channel waiting line model?
Page 20
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Chapter 17: Appendix: Modeling Using Linear Programming
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Q1) What characterizes a linear function?
Q2) For linear programming to work for project crashing decisions, a dummy activity is needed at the beginning of the project, with a duration of zero (0) time.
A)True
B)False
Q3) The transportation problem is a special type of linear programming that arises in planning the distribution of goods and services from only one supply point to several demand locations.
A)True
B)False
Q4) Which of the following factors would generally NOT be part of a linear programming model for production scheduling?
A) Fluctuations in production
B) Inventory levels
C) Waiting time probability distributions
D) Storage capacity
Q5) Explain the essence of a transportation problem.
Q6) Explain the essence of a blending problem.
Q7) Differentiate between a feasible solution and an optimal solution.
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Chapter 17: Lean Operating Systems
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Q1) Single minute exchange of dies (SMED) frees up capacity for other productive uses.
A)True
B)False
Q2) A(n) _____ produces finished-goods inventory in advance of customer demand using a forecast of sales.
A) single minute exchange of dies (SMED)
B) push system
C) Kanban
D) pull system
Q3) Which one of the following statements is TRUE of Lean Six Sigma?
A) Lean principles focus on advanced statistical methods.
B) It is difficult to use lean methods in nonmanufacturing environments.
C) It uses basic root cause, process, and data analysis techniques.
D) Six Sigma and lean principles are separate bodies of knowledge.
Q4) Explain the 5Ss.
Q5) Just-in-time (JIT) systems are based on the concept associated with pull systems rather than push systems.
A)True
B)False
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Chapter 18: Appendix: Simulation
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Q1) Which of the following statements is CORRECT regarding a simulation model for inventory management?
A) Only demand varies, while the lead time remains constant.
B) The goal is to minimize waiting time.
C) It looks at a combination of order quantity and reorder point.
D) It does not allow backorders of stockouts.
Q2) Given the table below with information on lead time, followed by a set of six random numbers, determine the average lead time. \(\begin{array}{ll}\text { Lead Time (days) }&\text { Frequency }\\
3 & 20 \% \\
4 & 70 \% \\
5 & 10 \%
\end{array}\) RANDOM NUMBERS: 90, 52, 54, 47, 56, and 95
Q3) Discuss two advantages and three disadvantages of simulation models.
Q4) When would an analytical queuing model be used? When would a simulation model be used?
Q5) Spreadsheets are extremely strong in their ability to conduct dynamic simulation analysis.
A)True
B)False
Page 23
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Chapter 18: Project Management
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Q1) A Gantt chart is a useful tool for allocating limited resources among project activities.
A)True
B)False
Q2) The expected duration of the critical path in days is _____.
A) less than or equal to 20 days
B) greater than 20 but less than or equal to 25 days
C) greater than 25 but less than or equal to 30 days
D) greater than 30 days
Q3) Which of the following is NOT true of time/cost trade-offs?
A) The relationship between time and cost is proportional and assumed to be linear.
B) Some activities cannot be crashed.
C) Crash time is less than normal time.
D) Crashing priority is based on the amount of uncertainty in activity times.
Q4) The expected duration of Activity A is _____.
A) Less than or equal to 2 days
B) Greater than 2 but less than or equal to 4 days
C) Greater than 4 but less than or equal to 6 days
D) Greater than 6 days
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Chapter 19: Appendix: Decision Analysis
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Q1) Making decisions in an emergency room of a hospital is an example of a decision analysis situation.
A)True
B)False
Q2) Which of the following statements is TRUE of a decision tree?
A) The number at each endpoint of a decision tree represents the probability associated with a particular chain of events.
B) A decision tree cannot be used for complex business decisions.
C) In a decision tree, event nodes are represented by squares, while decision nodes are represented by circles.
D) Expected value calculations can be made directly on a decision tree to arrive at the best decision strategy.
Q3) An aggressive or risk-taking approach to one-time decisions without event probabilities is called maximin.
A)True
B)False
Q4) List the four elements of a decision problem.
Q5) Differentiate between uncertainty and risk.
Q6) Explain the structure and purpose of a decision tree.
25
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